Tuesday, May 12, 2009

Caffeine addicts face higher prices for their daily fix as the wholesale cost of both coffee and sugar rise sharply because of poor crops and robust demand.

“We are in a dangerous situation,” Andrea Illy, chief executive of Italy’s leading coffee ­company, told the Financial Times, warning that prices could “explode” due to supply shortages.

His comments echo those of other industry players – and point to a sharp shift in sentiment among analysts.

Until recently, it was widely assumed that the global economic crisis would damp consumption and prices for coffee. However, that forecast proved wrong, since demand for coffee has remained high, even while consumers have moved from cafés to home drinking.

International coffee prices last week hit a seven-month high, rising to $1.28 per pound, up 22 per cent from their December low, in New York trading.

Scared me for a second.

It looks like coffee has gotten hit by the recent rebound in commodities, but that's like saying "oh no, gas is back to $2 a gallon". Lets just be thankful that coffee isn't back to the equivalent of $4 a gallon.